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Hard Lessons of September 11Millions of People Are Asking: ‘What Would My Family Do Without Me?’ Protect the People You Love with This Financial Safety Net By Elizabeth Lewin
erhaps more than anything else, the September 11 terrorist attacks were a reminder of what matters most—the people we love. Suddenly, ensuring that your family will be financially secure in the event of a tragedy has taken on greater urgency. Here are some things you can do to be sure that they will be cared for properly should the unthinkable happen.
Write a will. Once you’ve written it, you should make a point of reviewing your will at least every five years—more often than that if your circumstances change. Specific reasons to write or review a will include if you divorce or remarry, if you become a parent, if you change your name (or if anyone mentioned in the will changes their name), if your executor dies or becomes incapable of performing the duties of an executor, if you acquired a significant asset such as a home or an inheritance, and if you are unmarried but have a long-term partner. Nolo Press offers free information on wills at its Web site: www.nolo.com. Name a Guardian for Your Children: A will doesn’t just enable you to communicate how you want your financial assets to be distributed; it also allows you to name a guardian for your minor children. While choosing a guardian is never easy, it’s an essential part of the estate-planning process. If you were to die without designating a guardian for your children, the state would end up doing it on your behalf. They might choose a relative who you can’t stand. Mary and Mark died in a plane crash, leaving three children. Two went to Mark’s sister, a person Mary really disliked. The oldest child went to live with Mark’s brother a thousand miles away. Here are a few points to keep in mind as you consider who would be the most suitable guardian for your children. Are their child-rearing philosophies compatible with yours? It is a good idea to pick a guardian who shares your child-rearing philosophies. That way you’ll know that, should anything happen to you or your partner, your children will be brought up mostly the way you intended to raise them. The issue weighed heavily on Maria’s mind and led her to rethink her initial choice of guardian. “We chose my sister when we first drew up our wills,” the 31-year-old mother of two recalls. “She and her husband had kids close in age to ours, but we didn’t agree with their parenting techniques. To make matters worse, she had started to smoke again and I didn’t want my children to be brought up in a smoking environment. So we decided to name my brother as the legal guardian.” Does age matter? While you might be tempted to choose your parents or your partner’s parents, it is best to find someone younger and probably more energetic to take on the role. How does your child get along with this person? If your son adores your sister, then she might be a shoo-in for the position of guardian. But if she drives your child crazy and has no patience, you might want to rethink your decision. Mary and Mark’s sons had no relationship with their aunt, whose child-rearing philosophy was far different from their parents’. After a year the boys went to another family member. Make Sure You Have Enough Life Insurance. If you have children, a spouse, or others dependent on your income, you need life insurance. There are two kinds: term and whole life. Term life insurance provides a specific amount of coverage for a specific period of time. The policy expires at the end of the term, which can be as long as 20 years. Whole life insurance combines a death benefit with an investment account. It cost more than term, but it doesn’t expire unless you stop paying premiums. If you are young and simply looking to protect your family, then you’re better off buying the less expensive term insurance.
How much
do you need?
Everyone’s situation is very different. Financial planners
and insurance agents suggest five to 10 times your income. You need
enough insurance to create a nest egg for a surviving spouse, so that he
or she will be provided with the amount of income you were earning. If you
earn $36,000 a year, a surviving spouse would need a nest egg of $600,000,
invested at 6 percent annually, to bring in that amount of income. In
addition to replacing lost income, your life insurance should allow your
beneficiary to cover the outstanding mortgage, installment loans, the cost
of your children’s education, and final expenses. Remember to check the amount of life insurance you might have at your place of work. Most group plans provide a death benefit equivalent to only one to two years of salary. This is usually not enough for most families, and you should supplement it. If you leave your job, you might be able to convert the policy, but it will be costly. Some Web sites that can help you calculate the amount of insurance coverage you need include: www.term4Sale.com, www.Quotesmith.com, www.Ameritas.com, and www.usaa.com. You can get hundreds of quotes on the cost of a policy that’s right for you. But remember that cheap quotes apply only to people who meet very strict health standards. Those few extra pounds might make a difference. Organize Your Records. One of the biggest favors you can do for your survivors is to put your affairs in order when you are still alive. Something as simple as keeping a list of professionals you deal with (lawyer, accountant, insurance agent, stockbroker) and a record of the location of important documents, such as wills, bank accounts, insurance policies, investment statements, retirement accounts, real estate, can make a big difference to your loved ones. It is also helpful to keep all your papers in one place (a shoebox, a filing cabinet, a fireproof safe, loose-leaf notebooks). Betsy had no idea where her husband kept his papers. “He was ill for many years,” she says. “When I’d approach him about his financial affairs, he would say that everything was in place. ‘Don’t worry.’ He was involved in complicated real estate investments, and it took years to sort it all out. Meanwhile, I had to sell our home and borrow money to live on until I got a job as a saleswoman in a boutique. What a horror.” Billions of dollars of unclaimed money from bank accounts, insurance proceeds, and dividends, end up in state treasuries. If a bank account is inactive for a certain number of years (the period varies from state to state) and if the bank fails to locate the owner after placing an advertisement listing the last known address, the unclaimed property goes to the state. Life insurance proceeds can be paid immediately to a surviving spouse if she has the policy in hand. “After many months I found some life insurance policies,” says Betsy, “but he hadn’t paid the premiums in years, so I got nothing. He kept me in the dark and I allowed it. It was costly, both financially and emotionally.” One single day has made us aware of how important it is to keep our families financially secure and protected. Now it is more important than ever to get a will written, buy adequate life insurance, and set up a record system that someone can understand. If you haven’t already done these things, for your family’s sake, don’t put them off any longer. ________________________ Financial planner Elizabeth Lewin is the co-author of the recently published book, “Family Finance” (DearbornTrade). She is also the author of “Your Personal Financial Fitness Program,” “Financial Fitness for Living Together,” and “Kiss the Rat Race Good-bye.” Elizabeth has written articles for Redbook, New Choices, and Arthritis Today, among other magazines, and she has appeared on numerous national radio and television talk shows. |
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